Coinbase has urged U.S. regulators to update how they fight financial crime in the crypto space, arguing that modern tools can give law enforcement clearer leads while reducing low-value paperwork for honest businesses.
According to a letter dated October 17, 2025, the company asked Treasury officials to accept new approaches using blockchain analytics, artificial intelligence, APIs, decentralized identifiers and privacy-preserving proofs.
The filing is part of a public comment process related to a Treasury notice seeking ideas on “innovative methods for detecting illicit activity involving digital assets.”
Coinbase pushes tech-friendly rules
In the brief, which is approximately 30 pages long, Coinbase General Counsel Paul Grewal proposed several practical steps. Reports have leaked requests for safe harbor testing areas where companies could try new monitoring tools without immediate enforcement risk.
When the bad guys innovate in financial crime, the good guys need innovation to keep up. @coinbase submitted a response to @USTreasuryThe request for comments on “Innovative Methods for Detecting Illicit Activities Involving Digital Assets” to highlight this reality and 4 particular UST reforms…
– paulgrewal.eth (@iampaulgrewal) October 20, 2025
The company called on Treasury to recognize decentralized identifiers and zero-knowledge proofs as valid ways to verify customers, and to support standardized APIs so exchanges and regulators can share the right data.
Grewal wrote: “When the bad guys innovate in financial crime, the good guys need innovation to keep up. » This phrase was used to emphasize the company’s view that traditional forms-based reporting can miss real threats.
HAS @coinbaseWe are constantly modernizing our defense systems to protect our customers and national security. The government’s approach to tackling financial crime should be no different. This is why policymakers should embrace innovation to modernize the fight against money laundering through proven digital tools…
– Faryar Shirzad 🛡️ (@faryarshirzad) October 20, 2025
Why Coinbase says change is needed
According to Coinbase, current Bank Secrecy Act rules generate large quantities of suspicious activity alerts, many of which are low in value, and leave companies and regulators overwhelmed.
The company argued that an outcomes-based approach would focus on outcomes – such as whether illicit activities were actually detected and stopped – instead of imposing specific, often outdated, methods on each actor.
Reports show that Coinbase has also framed this as a national competitiveness issue, pointing to a white paper from its policy arm titled “The National Security Case for Crypto and Blockchain.”
Privacy and data concerns
At the same time, privacy advocates and some civil liberties groups have sounded the alarm. Blockchain tracing can reveal transaction links that were previously harder to discover, and activists worry about overreach.
Coinbase told Treasury it wanted fewer blanket data captures and more targeted, meaningful reporting — a move it said would protect privacy while improving enforcement.
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